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Rough Reckoning: Energy In Latin America

Rough Reckoning: Energy In Latin America

By Toni Solo

Much attention has focused lately on the Bolivian government's nationalization of the country's hydrocarbon resources. Bolivia's policy change follows up the Venezuelan government's systematic renegotiation of contracts with foreign petroleum companies which dramatically increased revenue available to benefit Venezuela's people. Ecuador has reinforced that regional trend by terminating agreements with the US oil multinational Occidental Petroleum in response to 43 alleged breaches of contract by that company. All these moves indicate a rethink by Latin American governments about how best to manage their energy resources.

Energy is a fundamental motif to examine in order to get some insight into the politics of the region and the wider international relations with which they interact. Energy relations perform inseparably from trade relations - something obscured in continuing arguments about "free trade", "globalization" and the erosion of national sovereignty. A look at the sustainability of natural gas and oil production is important in order to be able to fathom those relations. When thinking about sustainability it is common to think primarily of oil. But natural gas plays a correspondingly essential role in areas from electricity generation to general industrial and domestic energy consumption.

The following table summarises information made available by the US government's Energy Information Administration ( It offers the data in a simplified form including a mixture of real data and estimates from recent years. The oil data does not differentiate between different kinds of petroleum product. Recent revaluations of enormous previously uneconomic extra-heavy crude reserves are not included. The main purpose of the table is to give a general idea of the sustainability of production based on official US government figures. The table only includes the main South American hydrocarbon producers - it does not include Caribbean producers.

Argentina Bolivia Brazil Chile Colombia Ecuador Peru Venezuela
Oil Reserves (billion barrels) 2.30 0.40 10.60 0.15 1.54 4.60 0.90 77.20
Oil Production (barrels a day) 775800 35500 1839700 18400 530000 538700 111800 2855700
Years of production at these rates 8.13 31.31 15.79 22.33 7.96 23.39 22.06 74.06
Gas Reserves (trillion cubic feet) 18.90 24.00 8.80 3.50 4.00 0.30 8.70 151.00
Gas Production (billion cubic feet) 1400.00 200.00 310.00 35.30 215.00 1.80 19.80 1049.00
Years of production at these rates 13.50 120.00 28.39 99.15 19.05 166.67 439.39 143.95

Even on these simplified figures one can see that Venezuela, even without its vast newly-designated reserves, is by far the most significant producer of oil and gas in the region with reserves sufficient for over 75 years and 140 years respectively at current rates of production. Argentina is running out fast. Likewise one can see why Brazil and Argentina (as well as countries wholly dependent on imports like Paraguay and Uruguay) and, to a lesser extent, Chile seem determined to build a strategic alliance with Venezuela to ensure that they get secure supplies when faced with competition for energy resources from ruthless imperialist guzzlers like the United States and associated foreign multinational carpet-baggers.

The data helps make sense in strategic energy terms rather than ideological political terms of why the United States government has spent billlions of US tax dollars propping up just re-elected narco-terror President Uribe in Colombia. US and other foreign multinationals are leeching the country of its oil and gas resources as hard as they can go. Colombia is likely to use up its current oil reserves within a decade and its gas within a couple of decades, while the majority of its people remain mired in poverty and hunger. That fact also may explain the apparently paradoxical efforts President Uribe has made to maintain a good relationship with the Venezuelan government.

The stakes for foreign multinationals in the upcoming election run-off in Peru between Ollanta Humala and Alan Garcia are also clear. Production from Peru's important gas reserves are scheduled to increase significantly with pending developments of the Camisea fields. Nationalist Ollanta Humala would almost certainly negotiate better terms for Peru from the sale of its gas than foreign-multinational-friendly Alan Garcia. Even if Peru were to increase production close to Bolivia's current levels its reserves would still last for over 50 years. That contrasts with Chile's case where apparently an increase to Bolivian levels of gas production would exhaust its reserves in about 15 years.

To get a comparative idea of the global importance of South American gas reserves, the following table shows the countries with the world's largest reserves. South America's total as a region places it fifth in importance. So when spokespeople for the Bush regime voice concern about democracy in Bolivia, Venezuela, Russia or Iran, one can clearly juxtapose that hypocrisy against their deafening silence about democracy in countries like Qatar, Saudi Arabia or the United Arab Emirates, all loyal suppliers of energy to the US empire and its corporate subsidiaries. (Note that with its newly designated reserves, Venezuela will displace Saudi Arabia among the world's largest suppliers of oil.)

Country trillions cubic feet
% world reserves
Russia 1680 27.8
Iran 940 15.6
Qatar 910 15.1
Saudi Arabia 235 3.9
South America 219 3.63
United Arab Emirates 212 3.5

The US government worries about access to and control of energy supplies. That worry drives and interacts with trade, agriculture and aid policy to define diplomatic, military and corporate media propaganda strategies. The US government also still dominates the international financial institutions, cooperating closely with European partners to maintain control of those institutions. But now even the most crafty US-bad-cop, EU-good-cop manipulation of debt, trade and aid backed up by global corporate media propaganda campaigns and the threat of military force is failing against the refusal of the impoverished majorities in many Latin American countries to accept unending poverty.

Ecuador - up against it

Since the ouster of President Lucio Gutierrez early in 2005, people in Ecuador have become more acutely aware of the realities of their energy dilemmas and the contradiction between their country's natural wealth and its miserable economic development. Despite being an oil exporter, Ecuador imports about US$1.5bn a year in finished petroleum products because it has inadequate refining capacity to meet its domestic needs. Most of its petroleum exports are in the form of crude oil. Its vulnerability to social and political unrest by the poor majority demanding a decent life was acutely exposed during last August's petroleum strike when impoverished petrol producing areas insisted on more funding from central government..

At the time the Venezuelan government assisted its Ecuadoran counterpart by delivering much-needed oil supplies - totally contradicting US government claims that the Venezuelan government is a destabilising influence in the region. That assistance led to exploratory discussions towards a cooperation agreement finally signed this week in Quito during a flying visit there by Venezuela's President Chavez. Economy Minister Diego Borja declared that the deal should save Ecuador up to US$300 million a year by refining Ecuadoran crude oil in Venezuela for return to Ecuador as finished petroleum products. The deal provides for future collaboration in energy related projects such as expansion of refinery capacity.

The agreement comes after the Ecuadoran government terminated the US oil giant Occidental Petroleum's contracts in the country. The decision enabled Petroecuador, the State oil company, to recover fields capable of generating well over US$1bn in oil production for the benefit of Ecuador's people. The US government immediately responded by suspending negotiations on a "free trade" deal it had been proposing to replace preferential trade agreements with the Andean countries that expire next year. Taking advantage of that expiry, the trade-in-your-sovereignty deal on offer from the US was fundamentally disadvantageous to Ecuador in key areas like agriculture, services and intellectual property..

Increasing the pressure on the centrist Ecuadoran government, Occidental Petroleum has filed a claim for more than US$1bn in the International Centre for Settlement of Investment Disputes, a subsidiary body of the US government dominated World Bank. The Ecuadoran government's initial position is to reject the ICSID's competence to accept the case. But the central lesson of the dispute is that the US government regards trade, energy and investment as a seamless whole embodying its strategic interests. In that context, Ecuador's deal with Venezuela is another small sign that US influence in Latin America is in decline.

Global war on the poor

The corporate media gloss on that reality is to trivialise fundamental issues with infantile commentary on an advancing "pink tide" in Latin America. Such nonsense belies the brutal reality lived by societies ransacked by foreign corporations under the banner of "free markets". In Ecuador that translates into news reports of a local hospital in the town of Chone where 26 new born babies died for lack of adequate facilities and care. (1) The scandal provoked the resignation of Health Minister Ivan Zambrano. But he was a hapless scapegoat for the deep anti-humanitarian failure of neo-liberal economics imposed on highly indebted Ecuador for decades by the World Bank and the International Monetary Fund. To give some idea of how comprehensively those policies have failed In the wider national context, one might consider what it means that 54% of women in rural areas of Ecuador have no professional care at hand when they give birth.

Despite occasional discrepancies, the imperialist powers of North America and Europe and their Pacific allies like Australia and Japan view their interests as a seamless totality. Their political leaders talk hypocritically about "free markets" but intervene constantly as governments to rig international structures in favour of the corporations that embody their national trade interests. Their efforts to globalize their domination in a coherent, legally-binding, supra-national system conceal fears of dependence on countries rich in energy resources like Iran and Venezuela. Impoverished majorities in resource-rich countries in Latin America see more clearly than ever that unless their countries respond with coherent strategic alliances of their own, they will never benefit from their countries' enormous natural wealth.

Their children will continue to go hungry, poorly educated and needlessly sick. Their infants will continue to die wretchedly from hunger and from governmental neglect imposed through international financial institutions by the United States and its allies. People thoughout Latin America want a political settlement that will guarantee them a decent life. The contrary aim of the imperial powers and their corporations is to access and control Latin American resources as cheaply as possible. Advocacy for more "aid" is almost absurdly irrelevant. Rich country avowals of concern are utterly implausible.

In Latin America, support for politicians like Hugo Chavez and Evo Morales and recognition of Cuba's achievements has increased. It stems from ordinary peope's awareness of fundamental issues of justice and the vital importance of solidarity between peoples. In Colombia, narco-terror President Alvaro Uribe's militarized re-election means the impoverished majority there face another four years of repression and violence to make sure the foreign corporations and their governments can appropriate the country's resources on the most advantageous terms. Venezuela and Bolivia are targets because their governments refuse those terms and insist on ensuring their peoples a decent life.

At grass roots, people are more and more determined to force a reckoning either through elections or through extra-parliamentary campaigning and protest. Voters in Peru make their choice in the next few days. Mexico votes in July. People in Ecuador and Brazil do so in October. Nicaragua follows in November, Venezuela in December. While the elections may define the main political players the politicans elected will be speaking timeless lines already written and re-written by Latin America's age-old underlying drama : are the region's resources to benefit its peoples or greedy, murderous foreigners?

1. "La muerte de bebés descubre la grave situación de la salud", Argenpress, 27/05/2006


toni solo is an activist based in Central America - contact via

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